Debtor's Rights During CIRP and Liquidation

 

Debtor's Rights During CIRP and Liquidation

A. Rights of the Debtor During CIRP:

1. Right to Propose a Resolution Plan:

   • The debtor has the right to propose a resolution plan, either on its own or in collaboration with an investor or third-party bidder.

   • The debtor can negotiate terms with the CoC and seek to restructure its debts, propose a settlement, or make arrangements to revive the business.

2. Right to Challenge the Admission:

   • If the debtor believes the CIRP was initiated wrongly (for example, if there was no default or a pre-existing dispute), it has the right to challenge the admission of the CIRP before the NCLT.

3. Cooperation with IRP:

   • The debtor is required to cooperate with the Interim Resolution Professional (IRP), provide necessary documents, and allow the IRP to take control over the company’s assets and operations.

4. Protection from Legal Actions (Moratorium):

   • Once the CIRP is initiated, the debtor is provided a moratorium (temporary protection) from any further legal actions, suits, or recoveries against it by creditors.

5. Right to Participate in CoC Meetings:

   • The debtor can participate in CoC meetings and may present a resolution plan, especially if it believes that the company can be revived.

B. Rights of the Debtor During Liquidation:

1. Right to Challenge Liquidation:

   • If the debtor believes the liquidation process is unfair or wrongful, it can challenge the NCLT’s decision to liquidate the company.

2. Right to Receive Final Distribution:

   • If there are any remaining assets after all creditors are paid, the debtor (or its shareholders) may be entitled to the final distribution.

3. Obligation to Cooperate:

   • The debtor must cooperate with the liquidator during the liquidation process, allowing the liquidator to manage the sale of assets, verify creditor claims, and distribute the proceeds accordingly.